* Euro dips, but dollar's struggles lend some support
* Dollar index hovers near lowest in nearly two weeks
* Recent weakness of U.S. data weighs on dollar
By Anooja Debnath
LONDON, April 30 The euro fell on Tuesday after
weak economic data gave further weight to expectations of an
interest rate cut by the European Central Bank later this week.
Strategists however said losses in the euro are likely to be
limited on prospects the U.S. Federal Reserve's ultra-loose
policy will be maintained and weigh on the dollar.
The single currency slipped after data showed inflation in
the euro zone had fallen to a three-year low while unemployment
rose to a record high.
The data followed German retail sales which fell for the
second month running in March, confounding forecasts of a rise
and inflation figures which hit its lowest in more than two
The euro was down 0.2 percent at $1.3077 with traders
citing offers layered above $1.3110 and $1.3150 and chart
resistance at its 100-day moving average of $1.3158. Near-term
support was at the 55-day moving average of $1.3044.
Corporate accounts were cited as buyers of the euro on dips,
limiting its losses post the data.
"The euro zone unemployment rate was at a disappointingly
high level which certainly is of concern... this is a further
argument for the ECB to cut interest rates," said Ulrich
Leuchtmann, head of FX research at Commerzbank.
Some analysts said while a rate cut could see the euro
initially fall, announcing further easing measures would be
interpreted as a positive move by the central bank and this
could lend the euro some support.
"If the ECB were to resort to a refinancing rate cut on
Thursday and announce non-standard measures to boost credit
flow, we could see a bounce in the euro. But anything above
$1.32 is a sell," said Jeremy Stretch, currency strategist at
CIBC World Markets.
He added that dollar weakness was checking a sharper fall in
A slide in the two-year Treasury yield to a
nine-month low of 0.21 percent weighed on the U.S. currency.
The dollar index, which measures its value against a basket
of six major currencies, last traded at 82.165. It hit a
trough of 82.035 on Monday, its lowest since April 17.
The Fed kicks off its two-day policy meeting on Tuesday and
investors are watching to see if a sluggish recovery and
slowing inflation could not only end talk of tapering its
bond-buying but push the central bank into buying more assets.
"We are currently seeing significant dollar weakness...
reason for this is mainly speculation on further Fed
quantitative easing policy," Leuchtmann said.
"The view that the Fed would scale down QE is coming more
and more under question due to poor U.S. data."
The dollar was down 0.4 percent on the day against the yen
at 97.40 yen, not far from 97.35 yen hit on Monday, its
lowest level in almost two weeks.